Financial Planning for Millennials: Yes, You Can Afford It

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Wells Fargo recently released a study on millennials and their money, and among its revelations was that 80 percent of Gen Y'ers surveyed* said that seeing the impact of the Great Recession on their elders taught them how to save and survive.

%VIRTUAL-article-sponsoredlinks%But more than half reported that they were living paycheck to paycheck, and 42 percent said debt was their biggest financial concern. Even though Gen Y understands the importance of saving, they feel like they can't afford to put away as much as they should: 46 percent are saving between 1 percent and 5 percent of their incomes for retirement.

Given all that, you'd expect that millennials would really want some professional financial advice -- and they do. But while they'd like the help of a money pro, most don't feel they can afford it: 55 percent think they don't have enough money to get the assistance they need.

The good news for them is that they're mistaken: While that affordability disconnect may have existed in the past, a new way of providing financial planning advice is gaining popularity. Planners who work on a monthly retainer are good news for millennials.

Why the Financial Services Profession is Changing
  • Gen Y advisers see that their peers are not being serviced but are asking great financial planning questions (for example, "Should I contribute to a 401(k) or a Roth IRA?").
  • There's a shift afoot to get away from pushing commissioned products that clients don't actually need.
  • Advisers want to serve a broader client base, regardless of their accumulated assets.
  • Advisers are placing greater emphasis on the power of financial planning, rather than focusing solely on investment advice.
How Financial Planners Are Making Advice Affordable

What if you could work with a financial planner for the price of your monthly cell phone bill, would you? A new group called the XY Planning Network is providing fee-only financial planning on a monthly retainer so that you can do just that. These certified financial planners are all geared to help Gen X and Gen Y clients with their money. I'm proud to be a founding member of XYPN.

I work with clients in their 20s and 30s across the country, and I'm 30. Here are some reasons I've noticed why most people prefer to work with a financial planner of the same generation:
  • Gen Y advisers can directly relate to the needs of Gen Y clients. We are in a similar life stage and often have similar values. For example, I love to travel, and all of my clients value travel as well.
  • More flexibility in how they work. I work virtually with my clients, and this is ideal for them because it is easier to schedule a meeting after work or on a Saturday. There's no commute, and they don't have to take time off of work.
  • It's not all about retirement planning. Financial planning for millennials includes budgeting, strategizing around student loans and other debt, building savings, tax planning, buying insurance (or not), choosing company benefits and a whole lot more.
I continue to be impressed by how many millennials have plush emergency funds, are making six-figure incomes, and have paid off thousands of dollars in debt. We have witnessed two major stock market crashes in our lifetime, have seen our parents struggle and/or succeed financially, and ultimately want to make smarter choices with our money (even if it's just to be better with our money than our friends).

*(Survey respondents included 1,639 millennials between age 22 to 33, as well as 1,529 baby boomers age 49 to 59.)

Sophia Bera is a virtual financial planner for millennials and the founder of Gen Y Planning. She is location-independent but calls Minneapolis home. Do you want to be better with your money than 90 percent of your friends? Then sign up for the free Gen Y Planning newsletter.

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6 Little Changes You Can Make to Save Big Bucks
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Financial Planning for Millennials: Yes, You Can Afford It
Most of us spend a ton of time researching our options when we first sign up for a plan or policy, then forget all about it and make monthly payments like a robot. But this can cost you.

If you've been on the same cell phone plan for a while, or you haven't looked at the terms of your insurance policies (home, life, auto) since you got them, it's time to do a review. Your circumstances may have changed, and new plans or deductions may have come out since you first signed up. Call up customer service (or your agent) and have them walk you through your options if you're having trouble comparing things on your own.
One of the biggest budget sucks is our own forgetfulness. We miss payments and incur late fees because we've misplaced our statement or didn't manage to get our mail out in time. We fail to save as much as we'd like because we just never remember to do it.

The easiest way to save yourself some money (and hassle and stress) is to set it and forget it. Sign up for auto-pay so your monthly bills are automatically deducted from your checking account. Have a certain amount automatically transferred each month from your checking to your savings account. Remove the human error factor, and your budget will be better for it.
We charge so much nowadays -- whether on credit cards or debit cards -- that it's easy to spend a lot of money without really registering it. When you have a set amount of bills in your wallet, however, it's extremely easy to see how much you've spent so far this month and how much is left.

Take those budget categories of yours -- groceries, entertainment, etc. -- and turn them into real, physical envelopes. At the beginning of each month, put that month's allotment of cash into each envelope. When you're running low, you'll know you need to be careful with your purchases. When you're out, you're done spending on that category till next month.
If you're prone to impulse purchases, imposing a waiting period on yourself is an easy way to break the cycle.

For large purchases, a 30-day waiting list is best. Write down the item that's calling to you, then wait 30 days before allowing yourself to buy it. You may realize in that time that you don't need it after all. Or you may forget why it called to you in the first place.

For smaller impulse buys, like that fancy new product you spotted in the grocery aisle, follow a 10-second rule. Before the item can go into your cart, spend 10 full seconds asking yourself if you really need it and how you will use it. Simply analyzing why you're getting something can disrupt the siren call of a product.
It's all too easy to blow $5, $10, even $20 on something, whether it's an extra meal out or a coffee on the run. In the grand scheme of things, it "doesn't seem like much" to us. But if you start thinking of your money in terms of the time it took you to earn that money, suddenly you find yourself evaluating your spending choices a little closer.

Figure out what you make per hour if you're salaried (if you're hourly, this will be easy). Let's say you make $15 per hour. For every $15 you spend, you'll have to spend another hour of your time at work to pay for that item. A coffee a day for a week can cost you an hour or two. And bigger items, like that flat screen TV you're eyeing? You get the drift. Framing purchases in light of time spent can help you make sure something is worth it.
In the end, a budget is simply a means of making sure your money is working for you. It allows you to see how much you're brining in and allocate it towards the things that are most important to you. If you can hold those bigger goals in mind, everyday budgeting becomes easier.

If you're wondering whether or not to buy something, ask yourself if that money would be better spent towards your big goal. Put a visual reminder in your wallet to keep you on task-like a photo of a sandy beach if you're trying to save up money for a trip. Viewing your budget in terms of what it will allow you accomplish-not the things it won't allow you to buy, can revolutionize your spending.
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